UK regulator FCA develops measures for tokenization of funds
UK regulator FCA develops measures for tokenization of funds
The UK intends to develop a framework for the implementation of fund tokenization.
A report by the UK Technology Working Group makes recommendations for firms that decide to tokenize their funds to improve security. To do so, firms should be authorized, and the government should develop measures to improve regulatory clarity.
Experts from the regulator's panel have submitted a report on measures to implement tokenization of funds, Coindesk reported.
A special working group of the UK Treasury said that companies should confirm to regulators the ownership of traditional assets, which should be compatible with future technologies.
Tokenized funds offer tokenized shares that are traded and registered using distributed ledger technology. Technology compatibility means that tokenized shares can be transferred between different blockchains.
Certain tokenization models for funds have already been developed in the EU. In particular, the non-governmental bank Meltzer Asset Management has issued its tokens in test mode. Another organization, crypto exchange provider Archax, has converted its funds into tokens and plans to launch a regulated exchange for tokenized assets later this year.
The FCA is overseeing and supporting the commission's working group, said Sarah Pritchard, the FCA's Executive Director for Markets and International Cooperation.
"This direction opens up opportunities to explore other use cases in the future," Pritchard said.
However, regulatory clarity is needed for firms to launch tokenized funds. Firms will need to register with the FCA and comply with anti-money laundering rules. The FCA is developing a mechanism for faster approval of MLR applications for authorized firms.
The regulator's working group stressed that not all firms offering tokenization services can offer banking services and urged the government to regulate the issue.
By the end of the year, the UK plans to explore ways to develop a tokenization model for funds and will begin working with regulators to assess the implications for legislation.
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